Federal Reserve cuts in the federal funds rate have an unpredictable impact on long-term mortgage rates. So it's impossible to know for sure when -- or even if -- rates will fall as a result of the Fed's emergency rate cut.
How soon could it affect you? |
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Fixed-rate mortgages usually do not change in response to cuts in the federal funds rate. However, adjustable-rate mortgages may be more sensitive to Federal Reserve rate decisions, especially if the spread between the federal funds rate and the London Interbank Offered Rate -- more commonly known as LIBOR -- narrows.
Depending on the exact nature of their mortgage, some people with ARMs may see their rate adjust downward the next time the mortgage resets.
Conclusion
It's impossible to know when -- or even if -- fixed-rate mortgages will fall given the Fed's most recent trim to the federal funds rate. However, it's possible that some homeowners with adjustable-rate mortgages will see lower payments the next time their mortgage rate resets.
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Fed announcement: Oct. 29, 2008
